There’s always something to howl about.

If You Are A Home Builder – You Have A Problem

Cost Of Building Materials Likely To Rise Due To Hurricane Ike

Builders of new homes have been dealing with sluggish sales from lack of buyer demand, and with the potential of nearly $20 billion in damage due to Hurricane Ike – the cost of building materials could easily make a bad situation much worse.

Builders have not seen a reduction in material prices in spite of the slowing of construction over the last two years, due in part to reconstruction of the damage from Hurricanes Katrina and Rita. While some material costs have gone down, most have not – and this latest giant hurricane striking a major population center is undoubtedly going to push material costs up.

In the last year, spikes in the price oil have not only driven up the cost of many materials – it has also driven up the cost of subcontract labor for which builders rely. As energy costs go up – so do the manufacturing and transportation costs associated with the materials builders need.

To make it a trifecta, the number of recently-built home foreclosures is at an all-time high – thus giving new construction some serious competition, as home buyers can find some very nice, nearly new homes for much less than most new construction.

When you bring all of these factors to bear, you can rest assured that new home builders are in for some rough waters ahead. Rising costs will raise their “break-even” point, thus making their efforts less profitable without a retail price increase – which the current market will not bear. Since profitability is already impossible for many builders – more of them are likely to fail.

“It ain’t over ’til it’s over,” Yogi Berra once said. Once again, Yogi is right.